Topic 22

Remittances, Diasporas and States

Diasporas are an important and long-standing feature of the migration experience. Researchers have argued that diasporas can have a significant effect on their countries of origin through their economic and social linkages, particularly during times of civil conflict, war and insecurity. As the flow of remittances from international migration has increased, interest in the economic and social impact of remittances from diasporas has grown.

Several studies rely on the case study approach to illuminate the remittances sent by diasporas. Koser (2003) explores the Eritrean Diaspora and provides a detailed picture of the close involvement of a migrant population in the political and economic life of its country of origin. An interesting issue highlighted in his study is that since independence, adult Eritreans abroad have been asked by their governments to provide a voluntary contribution of their annual income to their homeland.

Empirical studies on diasporas and remittances face significant data challenges because existing data sources do not often provide information about the size of diaspora populations in the host economies. However, some insights can be drawn from studies that study how the size and strength of family and community networks in host and origin communities impact remittance flows. Funkhouser (1995) for example, finds that the greater the number of family migrants, the lower probability of sending a transfer and the contribution from an individual migrant, other things being equal. However, diaspora networks may also affect the migration decision and earnings opportunities in the host environment.

A current question in the literature is how sending countries can engage diaspora populations in order to maximize remittance and impact development in their homelands. For example, the Chinese and Indian diasporas have fueled development in their countries via both cash remittances and their direct engagement associated with the remittances. Many sending countries have sought to develop policies to maximize the amounts of remittances sent back and to stimulate investments by migrants. Remittances may be viewed as a vital source of foreign exchange and a major instrument of national economic development. In the Asian and Pacific context, this has also been referred to as the MIRAB model (Bertram 1986). This is as a national development model, in which a combination of “migration, remittances, aid, and (government) bureaucracy” is expected to contribute to the economic take-off of developing countries.

Over the past decade, many sending states have embarked upon more inclusive diaspora engagement policies through extending special political and economic rights to emigrants and allowing dual citizenship (Gamlen, 2006). Besides fostering ties with migrants and their descendants, improving banking systems and improving competition on remittance markets is seen as a vital strategy to prevent remittances from declining. The Moroccan state, for example, has been rather successful in stimulating remittances through a combination of Diaspora engagement policies, the creation of a network of banks abroad as well as macro-economic, fiscal measures favoring migrants to remit money (de Haas and Plug, 2006). Although such policies to attract remittances may yield some success, past experiences suggest that it is unlikely that increased remittances alone can trigger national economic development, as this requires creating institutional environments that are attractive for migrants to invest in.

Developed in the mid 1980s to explain economic processes in New Zealand’s sphere of influence in the Pacific islands, the MIRAB model has proved applicable across a wide range of island economies. Identifying features of a MIRAB economy are heavy reliance on transfer payments, including repatriated factor incomes, to finance current expenditure; a migration process that disperses the members of ethnic groups across geographical space while retaining the organic unity of families and communities; and a consequent transnationalization of the society’s economic activity whenever external niches of economic opportunity become accessible. Production of tradable goods is marginalized by the operation of market forces in the absence of regulation, and policies to promote tradable-led development have little application. The paper presents macroeconomic data to illustrate three stylized facts for MIRAB economies: persistent gaps between national expenditure and gross domestic product, a combination of large trade deficits with balanced current accounts (and hence limited debt accumulation), and the long-run stability of per capita aid flows. Some country-specific variations on the basic MIRAB model in the recent literature are reviewed, along with some recent economic literature on the microeconomics of transnational networks of kin and community.

de Haas, Hein, and Roald Plug. 2006. Cherishing the Goose with the Golden Eggs: Trends in Migrant Remittances from Europe to Morocco 1970-2004. International Migration Review 40:603–634. (Publisher Link)

In contrast to earlier predictions, migrant remittances from Europe to Morocco have shown an increasing trend over the past decades. Remittances constitute a vital and relatively stable source of foreign capital. The so-called “euro effect” and concomitant money laundering can only explain part of the recent, extreme surge in remittances. The structural solidity of remittances is explained by the unforeseen persistence of migration to northwestern Europe; new labor migration toward southern Europe; and the durability of transnational and transgenerational links between migrants and stay-behinds. The stable economic-political environment and new “enlightened” policies toward migrants explain why Morocco has been relatively successful in channeling remittances through official channels.

Funkhouser, Edward. 1995. Remittances from International Migration: A Comparison of El Salvador and Nicaragua. The Review of Economics and Statistics 77 (1):137–146. (Publisher Link)

This paper uses household data from El Salvador and Nicaragua to examine the determinants of remittances from international migration. Nearly twice as many households in San Salvador, the capital of El Salvador, receive remittances from relatives abroad than do households in Managua, the capital of Nicaragua, and of those who receive remittances, the average remittance received in San Salvador is over double that in Managua-$119/month to $45/month The author finds that the role of observable characteristics in explaining differences in the level of remittances, accounting for the self-selection in the decision to remit, is not large. The difference is explained by differences in the behavioral coefficients and by differences in the self-selection bias of those who remit out of the pool of emigrants between the two countries. The number of family migrants abroad has a negative impact on the propensity to remit and the amount remitted by an individual migrant.

This paper presents an original typology of diaspora engagement policies intended to facilitate comparative research. The typology is arises from a two part argument: a) that diaspora engagement policies consist of a diversity of measures aimed at (re)producing citizen-sovereign relationships with expatriates, and b) that these measures can be coordinated as part of states’ attempts to manage the scale of their political and economic manoeuvres. By using the typology to systematically review the diaspora engagement policies of over 70 states, the paper questions four key assumptions in existing literature on diaspora engagement policies, establishing that they are compatible with two models of citizenship, and arguing that they are not confined to any one kind of state.

In this chapter, Koser examines the the relationship between the Eritrean government and Diaspora. He argues that the Eritrean state has been able to build on the pre-war link between the Eritrean Diaspora and the government to mobilize support from the Diaspora and finance the Eritrean-Ethiopian conflict. In the post-independence era, the state has intensified its efforts to enhance its relationship with the Diaspora. The state has employed multiple strategies including the re-opening political offices in major host countries, the revitalization of Eritrean relief associations; and the participation of the government in events organized by migrants. Koser recognizes diaspora communities’ growing disillusionment with the government, and the emerging religious, ethnic and political factions in the post-independence era.

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